Backlash against Florida foreclosure fiasco gains momentum

Wake up and good morning. The coming disaster that is the screwed-up Florida foreclosure process is suddenly in the fast lane. I wrote a Sunday column in the St. Petersburg Times pointing out the general crisis of banks and law firms jamming flawed homeowner documentation through an overwhelmed state court systems manned by too many judges who don't understand or care that they are signing off on foreclosure judgments based on bogus ownership and blighted titles.

GMAC Mortgage (part of Ally Financial, owned in part by the federal government), JPMorgan Chase and Bank of America have all halted foreclosure proceedings to try and sort out this chaos. But they are already late in doing so and fixing this will come at a cost to the banks, certain law firms known as foreclosure mills, the delicate Florida housing market, buyers of foreclosed property, title insurance companies (as more refuse to provide clear title on foreclosure sales) and the tentative rebound in the Florida economy.

No sooner is that column in the paper, than a second wave of news hits. Here are some highlights from this morning and the weekend:

* In a Wall Street Journalstory out of Loxahatchee, Fla., the paper reports that banks in Florida, Maine, Texas and elsewhere are withdrawing affidavits signed by robo-signers (bank officials who sign foreclosure papers without even looking at them because of the high volume) and dropping their cases against homeowners, some consumer activists say they have more power to keep their clients in their homes while negotiating for better mortgage terms. "It's a brand new world for foreclosure activists," said Lisa Epstein, director of Caring for Americans in Foreclosure, a citizen advocacy group. Here's that story.

* An AP story says a Wells Fargo & Co. executive has acknowledged that he verified only the dates on up to 150 foreclosure documents he signed daily. So Wells Fargo -- which now owns Wachovia Bank -- joins big boys GMAC, JPMorgan Chase and Bank of America in the robo-signers of America club. Here's that story.

* Gretchen Morgenson's take on the foreclosure fiasco on today's front page of the New York Times is a good overview and cites analysts who say that the wave of defaults still does not excuse lenders’ failures to meet their legal obligations before trying to remove defaulting borrowers from their homes. The story includes this perspective from Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law: "It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order. Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past." Here's that story.

* The Sarasota Herald-Tribunereports that banks are hiring people to break into homes, even when occupied, and changing the locks to retake the houses as foreclosures. This story also tells of Sarastota landlord Brenda Perron's three-year battle with Bank of America, which has sent people to change the locks on Perron's rented condo three times because the bank mistakenly believed her condo was in foreclosure. Here's that story.

* The Bradenton Herald tells how Manatee County Circuit Court Judge Janette Dunnigan is fed up in her court and starting to penalize law firms that present foreclosure notices on behalf of banks but do not show up at hearings or cancel without notification. (Let's applaud the judge since she's well ahead of her peers, but what took her so long?) Here's that story.

The Journal also quotes Mark Zandi, chief economist at Moody's Analytics, about the greater impact of this foreclosure quagmire. "This growing mess in the foreclosure process just means that the day when the housing market recovers and economy returns to normal is farther away. It's not a question of, 'Will this be a weight on the housing market recovery?' It's a question of, 'For how long'?"

I could go on -- and I will later this week. But you get the picture. The big backlash against Florida's Foreclosure Machine is gearing up.

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Tampa Bay business news and insights are brought to you each day by business columnist Robert Trigaux and his fellow business writers. Venture provides an inside look at Tampa Bay companies as well as events, people, deal, triumphs and failures across the Tampa Bay economy.